The US has run out of bullets. More quantitative easing by the Federal Reserve is not going to make any difference. Treasury yields are already down to 2.5 percent yet credit spreads are widening again. Monetary policy can boost liquidity but it can’t deal with solvency problems.
We have reached stall speed. Any shock at this point can tip you back into recession. With interbank spreads rising, you can get a vicious circle like 2008-2009.
There is a 40 percent chance of double-dip recession in the US, and worse in Japan. Even if it is not technically a recession it will feel like it.
in the Ambrosetti Conference, Lake Como, Italy
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